Estimating Consumer Surplus in the Censored Linear Model

Land Economics, Vol. 68, No. 1 (Feb., 1992), pp. 83-92

11 Pages Posted: 24 Feb 2016

See all articles by Daniel Hellerstein

Daniel Hellerstein

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division

Date Written: February 22, 1992

Abstract

The TOBIT estimator of the linear model is commonly used to control for censoring. However, when predicting either demand or consumer surplus, simply substituting the resulting coefficient stimates back into the linear functional form is incorrect. This failure stems from the non-linear impact of variations in cut-off price in an otherwise uniform population. Several techniques that recognize this potential problem are recommended. The performance of these recommended techniques is investigated with a Monte Carlo simulation.

Keywords: consumer surplus, tobit, censoring, linear functional form

JEL Classification: C24, D61

Suggested Citation

Hellerstein, Daniel, Estimating Consumer Surplus in the Censored Linear Model (February 22, 1992). Land Economics, Vol. 68, No. 1 (Feb., 1992), pp. 83-92. Available at SSRN: https://ssrn.com/abstract=2736640

Daniel Hellerstein (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5613 (Phone)
202-694-5756 (Fax)

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